Read more about how we’re thinking and where we’re investing here.

In recent years “Data is the new oil” has become a frequently used phrase in tech and investor circles to describe the incredible rise in the importance of data for today’s economy. Some of the world’s most valuable tech companies are built on tremendous data network effects and access to unique data: Google, Facebook, Amazon, etc. For this reason, it should come as no surprise that many entrepreneurs are thinking about how to democratize access to data. This is partly because they believe that an individual’s data should belong to themselves, and partly because there might be a big business in this. Previous attempts to democratize access to data have been rather unsuccessful. There have been attempts to build platforms for <a href="https://www.versionone.vc/thesis-update-healthcare/">personal health data</a> or exchanges for advertising data to compete with the big networks like Google or Facebook (e.g. <a class="zem_slink" title="BlueKai" href="http://www.bluekai.com/" rel="homepage">BlueKai</a>). But to date, nothing has really scaled. Why? There can be too much friction – it’s not easy for consumers and enterprises to provide data into the network. There can be a lack of trust, particularly with healthcare data – what happens with my data and who will have access to it? And then, there haven’t been compelling financial and non-financial incentives to participate. Over the past year, there has been renewed energy among entrepreneurs to figure out this problem, partly because of the promises of the blockchain. While using the blockchain to manage data networks might initially create even more friction, it can help address privacy concerns. It can also provide a potentially strong financial incentive as participants can earn tokens in the underlying network that appreciate over time as the data network grows and becomes more valuable. It will be truly interesting to watch this space over the next few years and see how things play out. Will it be vertical (e.g. a platform focused just on genetic data) or horizontal approaches? Will exchanges be bootstrapped through data from individual consumers or rather large data sets from enterprises? What will be the financial or non-financial incentives to encourage participation? If you are working on such a project, please ping <a href="https://www.versionone.vc/about-us/">Angela</a> or myself – we’d love to hear from you.

<em>“It takes 10 years and $30m to become a great investor.” </em> This quote has stuck with me from the first time I saw it. I believe the legendary investor <a class="zem_slink" title="John Doerr" href="http://twitter.com/johndoerr" rel="twitter">John Doerr</a> said it at some point, but I can’t track down the original quote anymore. Of course, I thought it was a complete exaggeration when I started full-time investing on November 1, 2007 – the day after my last day at AbeBooks. How hard could investing be? Now, 10 years and $30m+ later, I believe those words. Why does it take so much time and money to develop into a great investor? Long feedback loops, ever-changing patterns and themes, and the impact of sheer luck on investment and start-up outcomes are just a few reasons. Think back to where we were in 2007. BlackBerry and Nokia were on top of the mobile world. The iPhone had just launched and Facebook had <a href="https://finance.yahoo.com/news/number-active-users-facebook-over-years-214600186--finance.html">50 million users</a>. These ten years of investing have taught me so much and I want to share three of the biggest lessons: <strong>1. Focus on the process, not the outcome</strong> <a class="zem_slink" title="Union Square Ventures" href="http://en.wikipedia.org/wiki/Union_Square_Ventures" rel="wikipedia">USV</a>’s Andy Weissman wrote a great post about <a href="http://blog.aweissman.com/2017/08/the-future-and-process.html">process and predicting the future</a>. No one has a crystal ball and as investors, we can’t control what happens with the start-ups we invest in. Good investing isn’t about guessing what’s going to happen in the future, rather it’s about creating a process to control how we make investment decisions. At Version One, we make thesis-driven decisions; we’re continually refining both our thesis and “founder checklist” and Angela and I discuss every potential investment intensively. Decisions don't have to be unanimous. <strong>2. Create an environment that maximizes rapid learning</strong> When you stop learning, you stop growing. <a href="https://www.versionone.vc/congratulations-angela-tran-kingyens-newest-principal/">Adding Angela</a> to the V1 partnership has been a huge asset for me – it has had a bigger impact than I could have ever predicted at the time. I’ve also found it important to build a close-knit network of like-minded investors in order to share, challenge and collaborate. And then, no matter how busy the week gets, you need to set aside enough time for reading, writing, and reflecting. <strong>3. Fight hard for the best possible outcome, but know your limits</strong> Once you invest in a company, you want to do all you can to make it as big of a success as possible. And for investors who have previously run companies, there’s always a temptation to dig in and exert your opinion. But, I’ve learned that an investor needs to accept where, when and how much he/she can move the needle. The <a href="https://www.versionone.vc/three-rules-vc-entrepreneur-engagement/">ultimate decision always needs to be with the entrepreneur</a>. Remembering who is running the company will release an incredible amount of pressure and tension in the investor-entrepreneur relationship. The last ten years have been an incredible ride, with over 75 backed companies and close to 20 exits. I’ve been able to experience highs and lows with some amazingly inspiring and ambitious entrepreneurs (some of whom I’m now getting the chance to back a second time). It has been an incredible personal learning experience and I’m looking forward to the next ten years!

A few years ago, we began to see SaaS companies integrate payment processing into their software. This push to integrate payments was due to a couple of factors. First, it offers a better user experience – why send somebody off-platform to pay for a product or settle an invoice? Next, adding payments to a platform is very profitable, since the SaaS company gets a cut of the payment revenue. And lastly, products like <a href="https://stripe.com/">Stripe</a> and <a href="https://www.braintreepayments.com/">Braintree</a> make it so much easier to add payments to your service. <a href="http://www.shopify.com">Shopify</a> is probably the best example of this trend. This year, Shopify’s merchant solutions (which are largely driven by payments revenue) <a href="https://investors.shopify.com/Investor-News-Details/2017/Shopify-Announces-First-Quarter-2017-Financial-Results/">overtook its “core” business</a> (subscription services). But beyond Shopify, virtually any transactional SaaS product out there has added payments – from horizontal solutions like <a class="zem_slink" title="FreshBooks" href="http://www.freshbooks.com" rel="homepage">FreshBooks</a> to vertical SaaS products like <a href="http://www.clio.com">Clio</a> and <a href="http://www.getjobber.com">Jobber</a> (both <a href="https://www.versionone.vc/our-portfolio/">V1 portfolio companies</a>). Software has become the wrapper for a commoditized product and as such, it has turned payments into a much more differentiated product. This fact should scare every undifferentiated payment processor out there. Now, we’re seeing a second category where software can provide a wrapper for a mostly commoditized product…. and that’s insurance. Insurance will integrate payments for exactly the same reasons as SaaS: a better user experience and additional revenue stream. I believe this trend will happen first in those (marketplace) settings where standard insurance products aren’t addressing the specific needs of marketplace participants. For example, this could be marketplaces with limited insurance offerings (like rentals). Another potential is short-term insurance needs in a category where insurance is typically much longer term, like car insurance. So, who will become the Stripe for insurance? Scale is a real advantage for insurance companies, so there’s a strong case to be made for an incumbent. And, some incumbents, like <a href="http://www.munichre.com/">Munich Re</a>, are extremely innovative in this space. However, there’s always the possibility that a start-up will be faster and grab the opportunity.

As a partnership evolves, you begin to formulate some basic rules and philosophies (whether formally or informally) to help guide long-term and short-term decision-making. It has been over four years since I’ve joined Version One, and just like any company, Boris and I need to continually take a step back and ask ourselves why we do what we do. It’s essential that our firm, our investors, our portfolio companies and our greater network are all aligned. To that end, we sat down to think about the core values that drive our culture and decisions. You may have noticed over the past month that we’ve been quietly updating our website. Most importantly, we re-worked our <a href="https://www.versionone.vc/philosophy/">investment philosophy</a>. You can read more about our core beliefs on the website, but here’s a summary: <strong>1) Technology has the power to transform the world.</strong> We believe in technology’s ability to solve problems and be a source of opportunity and hope. To be able to invest in companies that create meaningful value is what inspires each of us to get up in the morning. We are driven to helping today’s innovators make a difference in the world – whether it’s by improving service delivery, democratizing access to resources, simplifying collaboration, or tackling other social challenges. <strong>2) Network effects </strong><strong>lay the groundwork for lasting innovation.</strong> From the start, we have said that we invest in network effects at the seed level. We believe that network effects are key to ensuring lasting adoption and continued product value. The first wave of network effects connected people through marketplaces and social platforms – and we invested in companies like <a href="https://goshippo.com/">Shippo</a> and <a href="https://figure1.com/">Figure 1</a> in Fund I. The second wave of network effects are driven by AI/machine learning applications (and we’ve invested in companies like <a href="https://ada.support/">Ada</a> and <a href="http://www.asktrim.com/">Trim</a>). Now, we’re beginning to see enormous potential for network effects within decentralized crypto-platforms (and we’ve invested in <a href="https://www.coinbase.com/">Coinbase</a>, <a href="https://blockstack.org/">Blockstack</a>, and <a href="http://www.citizenhex.com/">Citizen Hex</a>) as well as genomics and biosciences (and we’ve invested in <a href="https://gencove.com/">Gencove</a>). <strong>3) You can build a large company in any location.</strong> Over the years, we have spent a lot of time in four key geographies: Toronto (nine investments), San Francisco (15 investments), New York City (five investments), and Seattle (four investments). These are important hubs where we have a strong network and the critical mass that are helpful for a growing startup. <strong>4) Every entrepreneur deserves a fast, open and respectful process.</strong> Every minute spent fundraising is one less minute spent on building a business. That’s why we work hard to provide a turnaround of just a few days. And we also try to give thoughtful feedback every time. <strong>5) We can make the greatest impact as a seed investor.</strong> We like betting on founders very early when the product is very raw. The seed stage is the most formative time for a startup and often, where you need the most support. As former operators, we welcome the opportunity to get our hands dirty with strategy, hiring, data, and more. <strong>6) An investor should be your biggest cheerleader and most trusted partner.</strong> In working closely with our founders, we are able to build a strong relationship of trust.  We often synch with our seed companies once a week. And with this trust, we hope to not only be our founders’ biggest advocates (we always champion our portfolio companies around others), but we also want to be the trusted friend who can dish out constructive criticism when it’s necessary. <strong>7) We never stop learning.</strong> Just as we push our founders to grow, we are constantly challenging ourselves to improve as a partnership. We strive to learn about new technologies (like blockchain and genomics) before they get too mainstream. And, we always seek out, appreciate, and learn from the feedback of entrepreneurs (like our <a href="https://www.versionone.vc/whats-nps-investors/">NPS survey</a>). &nbsp; We hope these words will provide a greater sense of why we fund what we fund. So far, we have invested in <a href="https://www.versionone.vc/our-portfolio/">over 50 companies</a>. If you have a deep domain knowledge and are looking to not only level the playing field but augment every player in the field, we’d love to talk to you.

Cryptocurrencies have strong network effects, built around the concept of mining. The more miners participate, the cheaper mining gets and the more quickly transactions are validated. (On a side note, this has actually not be true as of late for Bitcoin as it ran into scaling issues which is <a href="https://twitter.com/bwertz/status/905169994085842944">driving up mining costs</a>). In fact, network effects were initially deemed so strong that most people thought that Bitcoin would be <em>the</em> winner in a winner-takes-all market. But then, along came Ethereum and other cryptocurrencies. And, we began to see that crypto may not necessarily be winner-takes-all. Instead, we’ll probably end up with a number of cryptocurrency platforms, each <a href="https://www.versionone.vc/cryptocurrencies-winner-takes/">built around distinctive characteristics</a> or niches. While it’s not yet clear who the exact players will be, I predict that there will be a continuous redistribution of network effects through two mechanisms: forking and vertical integration. Just recently we have seen how forking can redistribute network effects when Bitcoin Cash split off from the main Bitcoin platform. Considering that mining has become pretty consolidated, it is actually easier than ever before to split off from the main platform if enough of the major mining players will come along for the ride. The second redistribution of network effects will happen when large utility tokens that got built on top of Ethereum will integrate backwards and create their own currency. The new platform will need to have enough scale to do this (and <a href="https://filecoin.io/">Filecoin</a> even started with their own token right away). I am curious to see how any redistribution of network effects will impact the future rise and fall of currencies and tokens. And, if redistribution is actually happening, does it mean that the <a href="http://www.usv.com/blog/fat-protocols">fat protocols</a> we’ve been envisioning might not be that fat after all?

<span style="font-weight: 400;">A month ago, we hosted the second virtual hangout with data teams across our portfolio. Our goal is to link up our data teams to build a peer network, share best practices, collaborate on solutions and push the bar on data science innovation. In case you missed the summary of our first session, </span><a href="https://www.versionone.vc/first-data-hangout/"><span style="font-weight: 400;">here’s a recap</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">We kept the same format as last time since our teams are distributed and still in the process of getting to know one another. We covered a wide range of topics but I want to share three questions that surfaced surrounding the theme of data management. As you’ll read below, our group didn’t form a strong consensus but rather had general recommendations for each question.</span> <b>Question 1: How do you maintain datasets? Do you do anything for versioning of data?</b> <span style="font-weight: 400;">Data is changing all the time: data is added, some is edited and deleted. Given that fact, the challenge for data teams is how to maintain integrity and reproducibility when working with dynamic data systems.</span> <span style="font-weight: 400;">Our group still has a lot of questions around how to tie versioning systems with their stack. Some are exploring products like </span><a href="http://www.pachyderm.io/"><span style="font-weight: 400;">Pachyderm</span></a><span style="font-weight: 400;">. Another product I’ve recently seen is </span><a href="https://quiltdata.com/"><span style="font-weight: 400;">Quilt</span></a> <span style="font-weight: 400;">(they position themselves as Github for data) and there is an open-source project called </span><a href="https://datproject.org/"><span style="font-weight: 400;">Dat</span></a><span style="font-weight: 400;">.</span> <b>Question 2: What type of third party data are you paying for?</b> <span style="font-weight: 400;">Many data teams look to augment their products with data that is not collected themselves - whether that data is publically free or from third-party providers that charge a fee.</span> <span style="font-weight: 400;">When data isn’t readily available via APIs or isn’t free, our teams opt to collect as much as they can by scraping. There are great tools out there like </span><a href="https://scrapinghub.com"><span style="font-weight: 400;">Scrapinghub</span></a><span style="font-weight: 400;"> as well as the Python library, </span><a href="https://www.crummy.com/software/BeautifulSoup/bs4/doc/"><span style="font-weight: 400;">Beautiful Soup</span></a><span style="font-weight: 400;">.</span> <b>Question 3: Where does information on your data live?</b> <span style="font-weight: 400;">In the first hangout, we discussed how the data team can and should be the company’s oracle of data. But where does this information actually live? It turns out, much of our portfolio has some sort of wiki for their data – whether that’s on Google Docs or Github.</span> <span style="font-weight: 400;">Our teams are big fans of </span><a href="https://pages.github.com/"><span style="font-weight: 400;">Github Pages</span></a><span style="font-weight: 400;"> vs. Github Wiki itself. With Github Pages, you can pull requests and edit like a wiki. One of our teams is trying </span><a href="https://notejoy.com/"><span style="font-weight: 400;">Notejoy</span></a><span style="font-weight: 400;">. It’s like Evernote: you can embed spreadsheets, tables and docs, and it’s also searchable.</span> &nbsp; <span style="font-weight: 400;">Was there a key takeaway from the hangout? Not exactly. We had a productive and collaborative discussion around the important topic of data management, but there was no strong consensus on any of the questions. Perhaps that’s because we’re all still in the early stages in the data science journey. Or perhaps, there’s just no single approach that will work for every business.</span> <span style="font-weight: 400;">We’d love to know what your team and/or organization is doing around any of these points. Do you pay for data? Are there some data/API marketplaces that you use? Are you versioning your data? Do you have some kind of wiki for your data? If you have any feedback or insights, please leave it in the comments section and we can all share, learn and grow together.</span>

<span style="font-weight: 400;">Another quarter has come and gone…</span> <span style="font-weight: 400;">We continue to invest in blockchain companies and funds such as </span><a href="https://www.coinbase.com"><span style="font-weight: 400;">Coinbase</span></a><span style="font-weight: 400;"> and </span><a href="http://metastablecapital.com"><span style="font-weight: 400;">Metastable Capital</span></a>,<span style="font-weight: 400;"> which join our existing crypto portfolio (</span><a href="https://blockstack.org"><span style="font-weight: 400;">Blockstack</span></a><span style="font-weight: 400;">, </span><a href="http://www.citizenhex.com"><span style="font-weight: 400;">Citizen Hex</span></a><span style="font-weight: 400;"> and </span><a href="http://polychain.capital"><span style="font-weight: 400;">Polychain Capital</span></a>)<span style="font-weight: 400;">.</span> <span style="font-weight: 400;">Here’s a quick recap of our other funding announcements, portfolio news, and product updates (the things we can announce publicly): </span> <b>Funding announcements</b> <span style="font-weight: 400;">We </span><a href="https://www.versionone.vc/announcing-investment-manifold/"><span style="font-weight: 400;">announced our investment</span></a><span style="font-weight: 400;"> in </span><a href="https://www.manifold.co"><span style="font-weight: 400;">Manifold</span></a><span style="font-weight: 400;">, t</span><span style="font-weight: 400;">he easiest way to find and manage essential developer services. </span><span style="font-weight: 400;">Manifold raised $15M, led by Omers Ventures. For more details, here’s founder/CEO Jevon MacDonald’s </span><a href="https://blog.manifold.co/coming-out-of-the-fold-announcing-our-15m-series-a-ab184d61351d?gi=b76d8669d5a2"><span style="font-weight: 400;">blog</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">We welcomed </span><a href="https://gencove.com"><span style="font-weight: 400;">Gencove</span></a><span style="font-weight: 400;">, </span><span style="font-weight: 400;">a B2B sequencing company, to our portfolio. It’s our </span><a href="https://www.versionone.vc/introducing-gencove/"><span style="font-weight: 400;">first investment in genomics</span></a><span style="font-weight: 400;">. If you’re interested in learning more, here’s a </span><a href="https://medium.com/the-seeq-blog/it-is-time-to-replace-genotyping-arrays-with-sequencing-73535efa66ed"><span style="font-weight: 400;">post from Gencove founder</span></a><span style="font-weight: 400;"> Joe Pickrell making the case on why it’s time to switch from genotyping technologies to sequencing technologies.</span> <a href="https://www.boosterfuels.com"><span style="font-weight: 400;">Booster Fuels</span></a><span style="font-weight: 400;"> raised a </span><a href="https://techcrunch.com/2017/08/01/booster-raises-20-million-to-fill-your-car-at-work/"><span style="font-weight: 400;">$20M Series B</span></a><span style="font-weight: 400;">. They are going way beyond being the “Uber for Gas,” and are completely </span><a href="https://www.bloomberg.com/amp/news/articles/2017-08-10/silicon-valley-wants-to-help-you-never-visit-a-gas-station-again"><span style="font-weight: 400;">reinventing the supply chain</span></a><span style="font-weight: 400;">.</span> <a href="https://www.ada.support"><span style="font-weight: 400;">Ada Support</span></a><span style="font-weight: 400;"> (an AI-driven customer support agent) came out of stealth and announced their seed round led by Bessemer. It was an </span><a href="https://www.versionone.vc/announcing-ada-support/"><span style="font-weight: 400;">impressive pivot from Volley</span></a><span style="font-weight: 400;"> (which we pre-seeded).  </span> <b>Select activities from around the portfolio</b> <span style="font-weight: 400;">Coinbase </span><a href="https://blog.coinbase.com/announcing-ethereum-litecoin-vaults-b10c3250cbe6"><span style="font-weight: 400;">launched Ethereum and Litecoin vaults</span></a><span style="font-weight: 400;">, bringing these assets in line with their current Bitcoin storage offerings.</span> <a href="https://www.clio.com"><span style="font-weight: 400;">Clio</span></a><span style="font-weight: 400;"> CEO Jack Newton was named to Business in Vancouver’s </span><a href="https://www.biv.com/article/2017/9/business-vancouvers-2017-forty-under-40/"><span style="font-weight: 400;">2017 Forty under 40</span></a><span style="font-weight: 400;">.  </span> <a href="https://blockstack.org"><span style="font-weight: 400;">Blockstack</span></a><span style="font-weight: 400;"> is now a </span><a href="https://blockstack.org/blog/public-benefit-corp"><span style="font-weight: 400;">public benefit corporation</span></a><span style="font-weight: 400;"> grounded in their continued mission to enable a decentralized Internet. The company also hosted its second summit in July. You can relive the event </span><a href="http://blockstack.org/summit2017"><span style="font-weight: 400;">here</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">Learn how </span><a href="https://www.helpful.com"><span style="font-weight: 400;">Helpful</span></a><span style="font-weight: 400;"> will change business and team communication forever on this </span><a href="https://itunes.apple.com/us/podcast/17-helpful-is-changing-business-communication/id1238877221?i=1000391592176&amp;mt=2"><span style="font-weight: 400;">podcast with founder and CEO Dan Debow</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">Manny Medina, </span><a href="https://outreach.io/"><span style="font-weight: 400;">Outreach</span></a><span style="font-weight: 400;"> CEO, wrote a great reflection on his “</span><a href="https://www.linkedin.com/pulse/undercover-boss-what-i-learned-trading-my-ceo-hat-technical-medina"><span style="font-weight: 400;">undercover boss experience</span></a><span style="font-weight: 400;">.”</span> <a href="http://upverter.com"><span style="font-weight: 400;">Upverter</span></a><span style="font-weight: 400;"> was </span><a href="https://blog.upverter.com/2017/08/28/upverter-joins-altium/"><span style="font-weight: 400;">acquired by Altium</span></a><span style="font-weight: 400;">.</span> <a href="https://goshippo.com"><span style="font-weight: 400;">Shippo</span></a><span style="font-weight: 400;"> added shipment tracking </span><a href="http://www.webretailer.com/news/3167-shippo-adds-shipment-tracking-for-22-new.asp"><span style="font-weight: 400;">for 22 new carriers</span></a><span style="font-weight: 400;">.</span> <a href="https://www.abstractapp.com"><span style="font-weight: 400;">Abstract</span></a><span style="font-weight: 400;"> officially </span><a href="https://techcrunch.com/2017/07/11/abstract/"><span style="font-weight: 400;">launched this quarter</span></a><span style="font-weight: 400;">, emerging as the versioning system of record for designers.</span> <span style="font-weight: 400;">Last, but not least, Forbes covered </span><a href="https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/laurashin/2017/07/10/the-emperors-new-coins/&amp;platform=hootsuite&amp;refURL=https://t.co/66gS5thy2q&amp;referrer=https://t.co/66gS5thy2q"><span style="font-weight: 400;">Olaf Carlson-Wee’s story</span></a><span style="font-weight: 400;"> at Polychain Capital.</span> <span style="font-weight: 400;">To make sure you don’t miss any events or announcements in the months ahead, follow us on Twitter at <a href="https://twitter.com/VersionOneVC">@VersionOneVC</a></span><span style="font-weight: 400;">.</span>

Recently, someone asked me about my principles for engaging with my portfolio entrepreneurs. The question was a good trigger to think about what drives my interactions with entrepreneurs and how my relationships have evolved over time. Three guiding principles provide the foundation for all my communications and engagement with entrepreneurs: <strong>1. Listen and ask questions (because I don’t have all of the answers)</strong> Like many investors, I came to VC <a href="https://www.versionone.vc/about-us/">after being an entrepreneur</a>. Having the operational experience of launching and running a business is often very helpful as I can share my own experiences and help entrepreneurs avoid some common pitfalls. But, at the same time, experience can lead one to think that he or she has all the answers. The truth is that every situation is unique – and the experiences and lessons from <a href="http://www.abebooks.com">my former company</a> won’t necessarily apply to every start-up and entrepreneur. And sometimes, the journey is just as important: people need to reach their own answers instead of being fed the outcome from the start. This is something I had to learn over the years as an investor. <strong>2. Give honest and direct feedback</strong> I’ve seen some investors say the most positive things to their entrepreneurs, only to complain about them and the company in private to their partners or fellow board members and investors. As investors, we need to be both cheerleader and critic. It’s easy to say the good things, but we can’t hold back on the tough feedback when it’s necessary. I often decide on the best way to deliver the feedback (1:1 versus board meetings), but I try to never withhold that feedback. Investors need to be honest and empathetic! <strong>3. Remember who is running the company</strong> Last but not least, I must remember who runs the company. The ultimate decision <strong>always</strong> needs to be with the entrepreneur. As investors, we can help him or her reach that decision…but we should never be the one making it. I’ll be the first to admit that it’s easier to give advice than to live by these rules on a day to day basis. There are times when I should have asked more questions or been more direct. However, I do keep these three rules in mind each day and am continually measuring myself against them as I grow.

We are very happy to announce our investment in <a href="https://www.manifold.co/">Manifold</a>, <span style="font-weight: 400;">the easiest way to find and manage essential developer services. </span> Manifold's value proposition is to give developers a better way to find and manage all the various cloud services that can help them build and scale their applications. Today, you don’t need racks of servers and months of development time to add in ops like databases, email, or debugging. Yet, developers often have to juggle multiple providers and vendor accounts in order to get the right services for their app. That’s where Manifold comes in. They’re offering an easy way to manage all the cloud services a developer wants to use. They handle the provisioning, billing, account management and more, so developers can spend even more time building great apps. Manifold currently has about a dozen services available right now, with many more coming very soon. Considering how much the cloud ecosystem is expanding, Manifold is poised to solve a big problem for many developers and buyers of cloud services and we are excited about the potential of the company to create a new marketplace in this area. In addition, I am thrilled to work again with <a class="zem_slink" title="Jevon MacDonald" href="http://twitter.com/jevon" rel="twitter">Jevon MacDonald</a>, Manifold’s CEO and co-founder. I got to invest in Jevon’s previous company, <a class="zem_slink" title="GoInstant" href="http://www.crunchbase.com/company/goinstant" rel="crunchbase">GoInstant</a>, which sold to Salesforce within a year of starting. While GoInstant was a very big success, Jevon wants to go “all the way” this time and has an incredibly vast and exciting vision for Manifold. It’s a true privilege to join Jevon and his team in this journey and we couldn’t be more excited. P.S.: More on the funding announcement <a href="https://blog.manifold.co/coming-out-of-the-fold-announcing-our-15m-series-a-ab184d61351d">on the Manifold blog</a>.

These days not a single meeting with a fellow VC goes by without talking about Blockchain and how to invest in this space. We are all a bit puzzled by how quickly this market has evolved. With a combined market cap of all crypto currencies <a href="https://www.coindesk.com/bitcoin-price-sets-new-time-high-crypto-market-tops-170-billion/">now topping $170b</a>, crypto has become more than a third of an Amazon or a Facebook. It has 10 times the market cap of SNAP, the most prominent IPO of 2017. At the same time, ICOs have emerged as a new way for projects to raise money globally in a frictionless way. And so, we keep hearing how <a href="https://twitter.com/briantobal/status/869938369446514688?ref_src=twsrc%5Etfw&amp;ref_url=http%3A%2F%2Favc.com%2F2017%2F06%2Ficos-and-vcs%2F">venture capital is about to be disrupted</a>. We’ve all heard this song before. The disruption of VC has been predicted many times – the last time we heard it was with the emergence of AngelList. There are many good reasons to argue that ICOs won’t completely disrupt the VC industry… from the fact that many projects raise VC money to fund their ICO to the idea that many VC-backed start-ups might use ICOs to augment their fundraise, like Kik is doing with their Kin ICO. And most importantly, most companies cannot and should not do an ICO as their <a href="http://avc.com/2017/06/icos-and-vcs/">business model is not decentralized</a> and hence their token has no utility value, Yet, with all that said, I still believe that this wave of decentralized platforms will be the biggest disruptor to hit the VC industry over the next decade. Here’s why: <strong>1. New investment thesis</strong> Decentralized platforms are a mix of a new technology and a new business model. The idea of fat protocols (“value accruing at the infrastructure layer instead of the app layer”) is fundamentally different to how a majority of VCs have invested over the past two decades. It will take some serious re-juggling of mental models to become successful in this new era. <strong>2. New way of investing</strong> VCs usually invest in privately negotiated rounds: you can usually only invest when a start-up does a funding round and you often have to win the deal against other VCs. Then, if you win the deal, you have major influence on the development of the start-up through negotiated governance mechanisms like board seats, information rights, anti-dilution rights, etc. But the tokenization of decentralized business models makes these projects immediately liquid assets: you can buy and sell at any stage (assuming enough liquidity). But you also have almost no influence on the project in terms of governance. Suddenly, the VC game might look much more like a small-cap hedge fund <strong>3. New way of running your VC business</strong> Blockchain and ICOs are giving VCs new ways to run their own businesses – from changing agreements with limited partners to allow the fund to buy tokens and currencies directly to figuring out how to safely store token and currencies. Or you might even think about a tokenization of your own fund (so that LP shares are liquid). I, for one, am incredibly excited about what is to come. Angela and I will need to partly re-invent ourselves and our fund over the next few years to get ready for these changes. Since the beginning of the year, we have gone hard into crypto opportunities and now have five investments in this space (<a href="https://www.versionone.vc/meet-latest-investment-citizen-hex-ethereum-liquidity-company/">Citizen Hex</a>, <a href="https://www.versionone.vc/announcing-investment-blockstack-new-decentralized-internet/">Blockstack</a>, <a href="http://www.coinbase.com">Coinbase</a>, <a href="http://metastablecapital.com/">Metastable</a>, and <a href="http://polychain.capital/">Polychain</a>). But this still only feels like the beginning. The good news is that the breathtaking speed at which the crypto space is moving right now will slow down once the current ICO bubble bursts. Decentralized platforms will not take over all available investment opportunities, but this is the start of a new era for VC investing.

<span style="font-weight: 400;">This week marks my fourth year at Version One. And to celebrate, I want to share the story of my interviews with Boris, my first endeavour to build a sourcing model, and his incredible leap of faith. </span> <span style="font-weight: 400;">In the summer of 2013, I was introduced to Boris by a fellow Canadian, Brendan Baker. I had met Brendan that past Spring when I had just left Insight Data Science and he was at Greylock Partners. Boris had closed Version One Fund I a year earlier and was looking for an analyst, so Brendan made the introduction.</span> <span style="font-weight: 400;">My first chat with Boris was over Skype and he asked me about my background and why I wanted to be in VC. In retrospect, I was probably a bit too honest when I said I didn’t know whether I wanted to be an investor. I told him that what mattered most was that my work aligned with my core values: continuous learning, compassion, and freedom.</span> <span style="font-weight: 400;">My answers must have impressed him enough that Boris suggested we meet in-person two weeks later when he would be visiting SF from Vancouver. In the meantime, he gave me an assignment: find three companies that would be a fit for Version One.</span> <span style="font-weight: 400;">My immediate reaction was: </span><i><span style="font-weight: 400;">why only 3 companies? </span></i><span style="font-weight: 400;">Naively thinking that the problem was our own capacity to sift through the large quantity of startups (and not the fact that there is a large noise to signal ratio), I asked myself, </span><i><span style="font-weight: 400;">what if I just developed a model to find more companies?</span></i> <span style="font-weight: 400;">Over the next two weeks, I set out to build my own Mattermark / CBInsights by aggregating the APIs of Crunchbase, AngelList, and Twitter, as well as any other relevant datasets I could get access to. I then applied some ML algorithms in an attempt to predict startup success.</span> <span style="font-weight: 400;">When it came time meet Boris, he asked which three companies I had for him. I don’t remember the exact conversation, but it went something like this:</span> <span style="font-weight: 400;">Me: </span><i><span style="font-weight: 400;">I didn’t find three companies because my goal was to build a model that identifies more companies in a scalable way.</span></i> <span style="font-weight: 400;">Boris: </span><i><span style="font-weight: 400;">So did you build it? What did you learn?</span></i> <span style="font-weight: 400;">I’ll share my answers in the paragraphs to follow. Despite my unconventional response, Boris must have thought that my out-of-the-box (read: crazy) thinking would somehow and in some way be complementary to him.</span> <span style="font-weight: 400;">Four years later, we certainly continue to complement one another and I’m thrilled to be part of the Version One partnership.</span> <span style="font-weight: 400;">Since that first attempt to build a sourcing model, we have explored data-driven sourcing. But just as I had uncovered during the interview, there are two major challenges:</span> <b>1) Data is incomplete, inconsistent or unavailable</b> <span style="font-weight: 400;">We only know that a company exists if they choose to announce or declare themselves to the world (this leads to incomplete data). The next challenge is that all the various data sources have different definitions and labels (leading to inconsistent data). And lastly, most business metrics, which are rich in information, are kept private (and this leads to unavailable data).</span> <b>2) Does success = a $1B unicorn?  </b> <span style="font-weight: 400;">If we define “success” as a company with a valuation of $1B, then our sample is skewed extremely heavily to failure. In fact, in 2015, Aileen Lee at Cowboy VC </span><a href="https://techcrunch.com/2015/07/18/welcome-to-the-unicorn-club-2015-learning-from-billion-dollar-companies/"><span style="font-weight: 400;">found that only 0.14% of venture-backed consumer and enterprise tech startups</span></a> <span style="font-weight: 400;">became unicorns. As a result, most, if not all, ML models will simply predict “failure” because they can hit an accuracy of 99.86%. In other words, these algorithms aren’t so strong at picking outliers (which is every unicorn).</span> <span style="font-weight: 400;">“Moneyball for VC” continues to fascinate me. While I am close to conceding that it is perhaps too difficult to predict success at the seed stage, I think there is great potential for funds that invest at later stages or are exploring other ways to provide “capital as a service” (like my friends at S+C). At later stages, there’s more access to private data that they can benchmark against their own successful portfolio.</span> <span style="font-weight: 400;">So, what do we do at the seed stage? First, we may need to redefine the definition of “success”. For a micro-VC like Version One, we don’t need a unicorn to have a meaningful returns. For us, a $100m or $200m exit would be significant and as such, we can increase the sample size for success and have a less skewed failure set to help with prediction.</span> <span style="font-weight: 400;">Another approach is to start quantifying founders and not companies. That is, can we identify the qualities and traits of a successful entrepreneur, and then evaluate founders accordingly? Boris and I have been refining our “founder checklist” which includes qualities like hunger/ambition, craftsmanship, storytelling, quick learner, etc. If any of you are interested in or are working on founder analytics, I’d love to chat.</span> <span style="font-weight: 400;">In the meantime, as I cross into year five, here’s to another awesome year ahead. And thank you to the best partner I could ever ask for, for taking such a huge leap of faith in me.</span> <span style="font-weight: 400;">-ange :)</span>

Initial coin offerings are a phenomenally successful way of raising money. Through ICOs, startups have <a href="https://www.cnbc.com/2017/07/18/startups-raise-record-1-point-27-billion-selling-bitcoin-other-cryptocoins.html">raised a record $1.27 billion</a> in the first half of 2017. When I wrote the post “<a href="https://www.versionone.vc/will-initial-coin-offerings-fund-future/"><em>Will Initial Coin Offerings Fund the Future?</em></a><em>”</em> back in May, the total tally was around $100m. In the few months since then since then we’ve seen single projects like <a href="https://www.tezos.com/">Tezos</a> raise over $200m. While I love the idea of lowering barriers to fundraising, I think there are two major shortcomings with current ICO models. First, the bubbly nature of the ICO market seems to favour the ability to tell a story over the ability to create a great product. The risk here is we’ll end up with more “stock promoters” than “product makers.” Second, many ICOs are built around tokens with no real utility value. Since the <a href="http://fortune.com/2017/07/26/sec-icos/">recent SEC ruling</a>, nearly every ICO tries to position their token as a utility, and thus avoid having their tokens classified as securities and subject to SEC regulation. But the reality is that very few of these tokens actually have utility value and could be regarded as “native tokens.” <a href="https://filecoin.io/">Filecoin</a>, <a href="http://www.numer.ai">Numerai</a>, <a class="zem_slink" title="Augur (software)" href="https://www.augur.net/" rel="homepage">Augur</a>, and <a href="https://golem.network/">Golem</a> come to mind – but that’s just a handful out of a sea of 1,000+ tokens. This means that in order to fundraise and be compliant with the law, tokens are getting created with no real value. The problem here is twofold: 1) it creates unnecessary friction for the users of a service and 2) it lowers overall network effects. Both are bad for the development of a thriving and healthy decentralized ecosystem and I hope we can develop new funding mechanisms that fix those shortcomings. What are those new funding mechanisms? I’m not entirely certain but one good example is how Tezos allows developers to attach a bill for enhancements they make to the service. This means that developers get paid for their individual contributions to the protocol (if the community agrees). <a href="https://twitter.com/FEhrsam">Fred Ehrsam</a> recently wrote a great post on the <a href="https://medium.com/@FEhrsam/funding-the-evolution-of-blockchains-87d160988481">evolution of blockchain</a> where he stressed how there are currently no economic incentives for anyone to contribute to a blockchain’s core protocols (and that’s a huge deterrent to innovation and growth). Figuring out the best funding mechanisms to properly incentivize developers to build our decentralized platforms will be key to their development and success in the near term.

There’s a lot of excitement surrounding the decentralized Internet and cryptocurrencies. Technological advancements plus <a href="https://www.versionone.vc/will-initial-coin-offerings-fund-future/">tokens</a> are shaking up traditional business models, enabling organizations to emerge outside the form of traditional companies that we know of today. There’s great promise to build large scale platforms to run open source projects among other things. But how exactly will these platforms be organized? If participants aren’t bound by legal entities and contracts, how will they be managed? According to <a href="https://en.wikipedia.org/wiki/Transaction_cost">transaction cost theory</a>, transaction costs are used to explain the size and structure of organizations. Ronald Coase’s <a href="https://en.wikipedia.org/wiki/Theory_of_the_firm"><em>Nature of the Firm</em></a> states that enterprises exist in order to decrease transaction costs: it can be more cost-efficient to bring partners in house rather than procuring goods and services via contracts and the market. Additionally, company size will be determined by transaction costs: company growth is initially advantageous (since it lowers transaction costs for procuring resources/services, etc.), but eventually, increasing overhead costs among other things will lead to decreasing returns. And this is what prevents a company from growing indefinitely. The Internet lowered transaction costs, in some cases to nearly zero. It’s significantly cheaper to find products, services, and suppliers. By the same token, today’s lower overhead and remote collaboration make it possible for teams to organize as a company where the the costs may have been too high to do so before. Tokens and decentralized platforms take this dynamic to the next level, making it even easier to get many people working towards a common goal. So what are the elements that decentralized platforms have at their disposal to manage the behavior of participants? There are three: financial incentives, formal governance and leadership. Ultimately all three elements are exactly the same core elements that traditional corporations have available to steer people and the company, but there are two key differences: <ul> <li>Decentralized organizations involve a way larger network of people</li> <li>Joining and leaving a network is practically frictionless, since membership is liquid. On one hand, this is advantageous since people won’t be hanging around for the wrong reasons. But, it has its downside too, since the speculators (people with short-term interests) can end up playing too big of a role.</li> </ul> <strong>Financial incentives (Tokens!)</strong> Issuing tokens gives participants a stake in the project. It’s an innovative business model to overcome the chicken and egg problem and it lets value increase accrue to the participants rather than a centralized entity. However, we still need more experience and experimentation to determine how token sales should be structured. Vitalik Buterin, co-founder of Ethereum, analyzed the pros and cons of the various <a href="http://vitalik.ca/general/2017/06/09/sales.html">token sale models</a>. His conclusion? <em>“Nearly every significant sale, including Brave’s Basic Attention Tokens, Gnosis, upcoming sales such as Bancor, and older ones such as Maidsafe and even the Ethereum sale itself, has been met with a substantial amount of criticism, all of which points to a simple fact: so far, we have still not yet discovered a mechanism that has all, or even most, of the properties that we would like.”</em> There are several considerations when it comes to token sale mechanisms: <ul> <li>What’s the function of the token? Is it a usage token or equity token? <a href="https://thecontrol.co/tokens-tokens-and-more-tokens-d4b177fbb443">Nick Tomaino explained</a> the difference between the two. A usage token doesn’t give you any specialized rights within the network but it does give you access to the service. Equity or work tokens give you rights to contribute work to the platform (and earn value) to help it function properly.</li> <li>What’s the mechanism? Funding against progress over time (several token sales) or an initial token sale that tries to maximize the money raised? I believe that funding against progress over time is optimal since a) too much money too fast is almost never a good thing (a lesson that many start-ups and VC investors have learned over the past decades) and b) the current approach of a large initial token sale results in <a href="http://continuations.com/post/161700099130/monetary-policy-for-crypto-tokens">extremely rapid appreciation of tokens</a> well ahead of their use value.</li> <li>Having some kind of built-in inflation (such as the future issuance of tokens) would limit this. In a recent post, <a href="http://continuations.com/post/161776542685/optimal-token-sales">Albert Wenger wrote</a> that an optimal token sales model would keep the initial sale small, hold one or more subsequent sales of increasing size and then hold a final sale once the protocol is ready that gets most of the tokens out for use.</li> </ul> The bottom line is we are still not at the point where we can truly grasp all the effects of each token sale mechanism. Experience will help show us what works best. &nbsp; <strong>“Formal” governance</strong> Governance is the second crucial element to managing blockchains. The first question that arises is who votes and how should voting be structured? One approach is through proof of work (e.g. solving a math quiz or confirming a transaction). The other approach is proof of stake (owning a piece of the currency). Proof of work is a very capital intense process; as such, it can lead to centralization and the potential for a 51% attack. A decentralized organization also needs to figure out how to manage changes to the blockchain. One approach is a hard fork: if participants cannot agree on changes, the losing minority decides to split off through forking the blockchain (what we just experienced with <a href="https://www.coindesk.com/bitcoin-fork-watch-bitcoin-cash-hard-fork-august-1/">the recent Bitcoin hard fork</a>). This can be quite risky since a hard fork weakens the base for both projects. We’re seeing a different approach with <a href="https://www.tezos.com/">Tezos</a> which is attempting built-in governance, including a process to discuss and approve/disapprove proposed changes and hence integrate the changes from within the protocol. &nbsp; <strong>Leadership </strong> Leadership can come from different groups. It can be the founders of the protocol – like <a href="https://en.wikipedia.org/wiki/Vitalik_Buterin">Vitalik Buterin</a> who has been the public face and voice for Ethereum for awhile now. It can be the people who run the foundation (like the <a href="https://www.ethereum.org/foundation">Ethereum Foundation</a>) that manages the protocol and plays an active role in interpreting the mission and core value of the protocol. Last but not least, we may see the emergence of activist investors that only have a small stake in the protocol but have enough influence or large enough reputation to have their voices heard. This is an incredibly exciting time: blockchain is a socio-economic experiment at massive scale. It offers new ways for people, schools, companies, organizations, governments and communities to organize, work together, and earn money. During this experimental phase, there will be failures – but it will still be fascinating to see the governance structures that form behind each network. However, I believe that the vision and continued involvement of the founding teams will be critical over the next few years as we learn to use the other mechanisms to manage these projects.

<a href="https://www.linkedin.com/in/georgepsiharis?ppe=1"><span style="font-weight: 400;">George Psiharis</span></a><span style="font-weight: 400;"> (the awesome VP of Business Operations at </span><a href="https://www.clio.com"><span style="font-weight: 400;">Clio</span></a><span style="font-weight: 400;">) reached out with a great suggestion: connect the data teams across our portfolio companies with the goal of building a peer network to share best practices, and together push the bar on data science innovation.</span> <span style="font-weight: 400;">A few weeks ago, we had our first virtual hangout with data scientists in our portfolio from San Francisco, Vancouver, Toronto, and New York. Some common problems surfaced during the discussion, and since I’m certain that our portfolio companies are not the only ones facing these issues, I want to share some of the key lessons from the discussion so we all can grow together…</span> <b>Challenge 1: Data is fragmented and inconsistent across the organization</b> <span style="font-weight: 400;">Let’s think about the typical (and simplified) data flow in a company: raw data is aggregated, normalized or processed and then stored in a data warehouse. That data is then consumed and interpreted in the form of dashboards.</span> <span style="font-weight: 400;">As a company grows bigger, dashboards sprout up all over the organization with KPIs and metrics that mean different things to different people. In addition, different parts of the organization usually create their own dashboard for a view of more team-specific metrics (like sales, marketing, product, etc.). And in many cases, these team-specific dashboards and benchmarks aren’t perfectly aligned with higher-level business KPIs.</span> <span style="font-weight: 400;">What’s the problem with this? Dashboards are essentially end points of data and the process of creating a dashboard usually involves transforming raw data which can compromise data integrity, consumption and interpretation. There’s a risk that teams will diverge on the definition of metrics the farther we get from the data warehouse. For example, one team might define an “active user” differently from another team in the same organization. In other words, each team’s dashboard is now a silo of information, resulting in data fragmentation and inconsistency.</span> <span style="font-weight: 400;">So, how do we make sure that there is consensus on the definition of KPIs as dashboards become more fragmented? Can we set a gold standard? And how do you make sure that everyone is aligned?</span> <span style="font-weight: 400;">For starters, the company’s data science team can be the oracle of definitions. In situations where there are already multiple dashboards in place across the company, the data team should review all dashboards and learn how the KPIs are being defined and used by each team. Then, they should come up with a company-standard ‘glossary of terms.”</span> <span style="font-weight: 400;">Clio has set up a “data literacy course.” It’s mandatory training so that everyone is on the same page about core metrics. Since Clio is a SaaS company, they have everyone take a crash course on MRR, LTV, CAC, Churn, etc.</span> <span style="font-weight: 400;">In the hangout, general consensus was that this kind of training should be part of the on-boarding process, and then as “a lunch and learn” or part of your All Hands meeting once or twice a year as a refresher for all employees. It can be helpful to administer a test afterwards in order to gauge comprehension. And then each team may need to have specialized training sessions with a deeper dive into their specific metrics.</span> <b>Challenge Two: Scaling data science powers to meet the firehose of data pull requests</b> <span style="font-weight: 400;">So, let’s say that you’ve got all your data centralized in one place and everyone sees the data science team as the “Oracle.” Sounds great, but the problem is there’s a never-ending list of Trello/Asana requests for data pulls from all around the organization. You’re a small data science team, so you try to create some kind of process like asking teams to fill out data request forms so you can assess the priority/urgency of each data pull. But everyone ends up resenting this extra administrative work since they want their data now – and in the meantime, new requests just keep coming in.</span> <span style="font-weight: 400;">The question is how can you empower different parts of the organization with data? How can you scale your data science powers without necessarily scaling the team?</span> <span style="font-weight: 400;">At </span><a href="https://www.kinnek.com"><span style="font-weight: 400;">Kinnek</span></a><span style="font-weight: 400;">, they’ve assigned a “data liaison” to each team. It’s someone who’s already engaged with data (think analysts or the dashboard manager for sales, product, etc.). The data liaison serves as triage for their team and only escalates requests to the data science team when necessary. For example, marketing has email data – so if you need email data, you can go to the designated data liaison in marketing for help with this information. Think of it like a </span><a href="https://www.versionone.vc/domino-data-takeaways/"><span style="font-weight: 400;">hub and spoke model</span></a><span style="font-weight: 400;"> (a hybrid centralized/decentralized model).</span> <span style="font-weight: 400;">At Kinnek, the data science team develops these data liaisons to be more than analysts. The goal is to have each liaison be able to query directly from the warehouse. The company provides Python/SQL training sessions and refreshers, with “homework” being related to the business. The added bonus here is that employees enjoy the challenge and know that the company is invested in their development.</span> <span style="font-weight: 400;">The key takeaway from the hangout? Education and development can help you address scalability issues in data science. Because the human element will always be the key to good data.  </span> &nbsp;

Nearly two years ago, we published our first ebook, <a href="https://www.versionone.vc/marketplace-handbook/">A Guide to Marketplaces</a>. Towards the end, we touched briefly on emerging marketplace types and included decentralized marketplaces in the mix. At the time, OpenBazaar was still in beta. Since then, we’ve been closely following the evolution of blockchain technology and looking at the potential impact that blockchain will have on the marketplace landscape. In terms of decentralized marketplaces today, <a href="https://www.openbazaar.org/">OpenBazaar</a> is really the only game in town for buying/selling physical products and reminds one of a decentralized version of eBay. It’s an open source project to create a peer-to-peer commerce network using Bitcoin. With OpenBazaar, there’s no middle man: the platform connects buyers and sellers directly. And since there’s no one in the middle of a transaction, there are no fees and no restrictions on what goods can be listed and sold. OpenBazaar realizes blockchain’s promise to bring power back to the edge (aka the users). A decentralized marketplace is an interesting proposition and we are eagerly watching how new marketplaces based on blockchain may disrupt existing (centralized) marketplaces. However, the big question of the day is if a decentralized platform will be able to create the same great customer experience that we’ve grown accustomed to on centralized marketplaces. Can a decentralized platform offer the same kind of UX, conflict resolution tools, and customer service? The other question is will decentralized marketplaces be pushed to the fringe and just attract buyers and sellers for illicit goods? If so, just how scalable are these kinds of use cases? These are important questions and we’re still not certain in what ways a decentralized marketplace can disrupt a well-functioning centralized marketplace. Will a decentralized marketplace replace a centralized one, or will blockchain technology become a part of an existing marketplace? While there may be challenges associated with replacing well-established marketplaces, tremendous opportunities exist to enable something new and create a brand new generation of marketplaces. Prime candidates are marketplaces for digital assets that allow anyone in the world to conduct a transaction with any other participant without having a central instance manage the transaction (e.g. payment settlement, etc.). Examples include: <ul> <li>Prediction markets like <a href="https://augur.net/">Augur</a> or <a href="https://gnosis.pm/">Gnosis</a> that enable completely new financial products (buying and selling options; insurances/betting on potentially any “event” in the world)</li> <li>Decentralized storage (<a href="https://filecoin.io/">Filecoin</a>, <a class="zem_slink" title="Sia" href="http://sia.tech/" rel="homepage">Sia</a>) and computing markets (<a href="https://golem.network/">Golem</a>) that can leverage underused computing power and replicate the <a class="zem_slink" title="Airbnb" href="https://www.airbnb.com" rel="homepage">AirBnB</a> model for digital assets</li> <li>Decentralized exchanges that allow for trading the ever rising amount of tokens and currencies supporting the buying and selling of this new asset class</li> <li>Data marketplaces: there is potential to create decentralized marketplaces around the collection and distribution of data – there are no specific projects yet but it’s certainly an area we are watching.</li> </ul> The business model for these decentralized marketplaces will likely be built around tokens where buyers will have to pay fees (with the marketplace token) and sellers earn tokens by contributing to the marketplace. As the marketplace’s usage grows, those tokens will hopefully further appreciate, making participation from the supply side even more attractive. This will solve the chicken and egg dynamic that can pose such a problem for young marketplaces. It will also create strong network effects as the platform grows, resulting in a winner-takes-all where the biggest player is way bigger than its competitors.

<span style="font-weight: 400;">Today, we’re excited to announce our first investment in the genomics space. We welcome <a href="https://app.gencove.com">Gencove</a> to the Version One portfolio: they’re making genomics accessible and useful to all.</span> <span style="font-weight: 400;">We first met Joe Pickrell, the founder of Gencove</span><span style="font-weight: 400;">, a year ago when he shared that he was building an inexpensive technology that </span><i><span style="font-weight: 400;">actually</span></i><span style="font-weight: 400;"> sequences the genome as opposed to genotyping it.</span> <span style="font-weight: 400;">If you’re not sure about the distinction: </span><b>genotyping</b><span style="font-weight: 400;"> is the process of determining which genetic variants an individual possesses. It requires prior knowledge of identifying variants of interest. </span><b>Sequencing</b><span style="font-weight: 400;"> is the process of determining the exact sequence of a certain length of DNA. You can sequence the whole genome or parts of it. Depending on the “region”, a given stretch of sequence may include some DNA that varies between individuals as well as some that are constant. Hence, sequencing can be used to genotype someone for known variants but also to identify variants that may be unique to that person.</span> <span style="font-weight: 400;">Here’s a </span><a href="https://www.quora.com/What-is-the-difference-between-genotyping-and-sequencing"><span style="font-weight: 400;">simple analogy</span></a><span style="font-weight: 400;">: genotyping would be like pointing out the differences in two books, while sequencing is reading the books. The latter is more comprehensive and as you can imagine, also more costly.</span> <span style="font-weight: 400;">At the time we first talked, not only had Joe and his team (</span><span style="font-weight: 400;">Tomaz Berisa and Kaja Wasik) </span><span style="font-weight: 400;">created a genome sequencing method which could go to market for $50 (compared to $1000 by everyone else), they had also developed a beautiful mobile app with the intent of going after the consumer market. We admittedly had our apprehensions of competing against Ancestry and 23andMe, who despite not actually sequencing the genome (they’re </span><span style="font-weight: 400;">genotyping</span><span style="font-weight: 400;"> solutions), already had significant mindshare.</span> <span style="font-weight: 400;">Six months passed and we reconnected in February. We were quick to invest alongside </span><span style="font-weight: 400;">Third Kind Venture Capital</span><span style="font-weight: 400;">, </span><span style="font-weight: 400;">Refactor Capital</span><span style="font-weight: 400;">, </span><span style="font-weight: 400;">SV Angel</span><span style="font-weight: 400;">, </span><span style="font-weight: 400;">and Kresimir Penavic</span><span style="font-weight: 400;">. The Gencove team has since uncovered an incredible B2B opportunity: building out tools to interface with their API to create infrastructure for the seamless flow of genomic data. </span><span style="font-weight: 400;">Companies creating the next generation of ancestry, microbiome, and other genomics products should not have to build a lab from scratch; they should be able to focus on their own expertise and let customers bring genomic data directly to them.</span> <span style="font-weight: 400;">In other words, Gencove offers a full stack API for genomic data - from sample collection to sequencing, processing to interpretation. It’s lab kit to results!</span> <span style="font-weight: 400;">This is all incredibly exciting. So much of future research and breakthroughs in healthcare will depend on how we can affordably collect, store, process and interpret data.</span> <span style="font-weight: 400;">We are at the beginning of unlocking the potential of genomics and much of the value is rooted in the amount of data we can uncover with </span><a href="https://www.slideshare.net/kleinerperkins/internet-trends-2017-report/317"><span style="font-weight: 400;">the advancement of this technology</span></a><span style="font-weight: 400;">. Gencove can collect the data and help interpret it, so that companies and research groups don’t need to incur this overhead themselves.</span> <span style="font-weight: 400;">At Version One, one of our core beliefs is the democratization of knowledge. We’ve written before about the importance of increased accessibility, distribution, inclusion, productivity and collaboration to improve the lives of all. Access to genomics data seems to be the precursor and enabler for more affordable healthcare.</span> <span style="font-weight: 400;">Lastly, while we are still in the very early stages in this field, we are definitely at a tipping point given that today’s computing power and storage are making it possible to do all this affordably. Imagine a future where genomic data is ubiquitous. At this point, we can’t even predict all the possibilities. Just like back in the Mainframe era, no one could have anticipated that it would lead to the PC to mobile, etc., which now drives everything that we do.</span> <span style="font-weight: 400;">We’re thrilled to welcome Joe, Tomaz, and Kaja to the Version One family. To learn more, visit https://app.gencove.com.</span>

<span style="font-weight: 400;">We hope everyone had a great Canada Day and/or Fourth of July! It’s hard to believe that another quarter has flown by. </span><span style="font-weight: 400;">Q2 has been busy for Version One and our portfolio companies – here’s a quick recap of select news coverage, funding announcements, and product updates (at least the things we can announce publicly):  </span> <b>Funding and follow-ons</b> <span style="font-weight: 400;">We </span><a href="https://www.versionone.vc/meet-latest-investment-citizen-hex-ethereum-liquidity-company/"><span style="font-weight: 400;">announced our investment</span></a><span style="font-weight: 400;"> in </span><a href="http://www.citizenhex.com/"><b>Citizen Hex</b></a><span style="font-weight: 400;">, an Ethereum liquidity company. Among their solutions is a </span><span style="font-weight: 400;">proprietary tool for token acquisition and decentralized trading and they’re also building the world’s most secure, cold, warm, and hot wallet solutions for token storage.</span> <a href="https://outreach.io"><b>Outreach</b></a><span style="font-weight: 400;"> announced their </span><a href="https://techcrunch.com/2017/05/23/outreach-raises-30-million-pitching-a-tool-sales-teams-can-use-to-sell-more-and-work-less/)"><span style="font-weight: 400;">$30m Series C</span></a><span style="font-weight: 400;"> led by DFJ Growth. They were also recognized as the best mid-sized company to work at in Washington. Congrats to the entire team!</span> <a href="https://figure1.com/"><b>Figure 1</b></a> <span style="font-weight: 400;">announced their </span><a href="https://techcrunch.com/2017/06/13/the-instagram-for-doctors-just-raised-a-fresh-10-million/?ncid=rss"><span style="font-weight: 400;">$10m Series B</span></a><span style="font-weight: 400;"> and shared how they plan to </span><a href="https://www.fastcompany.com/40431353/how-figure-1-the-instagram-for-doctors-app-plans-to-introduce-ai"><span style="font-weight: 400;">add AI to their product</span></a><span style="font-weight: 400;">, starting with electrocardiograms. Think of the implications for healthcare when advanced machine learning systems can provide insight into what certain readings mean.</span> <b>Portfolio Companies in the News</b> <a href="https://blockstack.org"><b>Blockstack</b></a><span style="font-weight: 400;"> announced that they are hosting their </span><a href="https://blockstack.org/blog/blockstack-summit-2017-freedom-to-innovate/"><span style="font-weight: 400;">2nd annual summit</span></a><span style="font-weight: 400;"> in Mountain View - get your tickets now! To gear up for the summit, you can check out </span><a href="https://www.youtube.com/playlist?list=PLXS8JJHIn4nEv_LcXIaklH_QAZaDEVD8q"><span style="font-weight: 400;">Blockstack Academy</span></a><span style="font-weight: 400;"> for a series of </span><span style="font-weight: 400;">educational videos featuring the founders, Ryan Shea and Muneeb Ali, on the history of the Internet, distributed systems principles and pitfalls, and a vision for what can be built using systems like Blockstack</span><span style="font-weight: 400;">.</span> <a href="https://www.trybooster.com"><b>Booster Fuels</b></a><span style="font-weight: 400;"> continues to deliver gas in Silicon Valley and recently shared </span><a href="http://www.cspdailynews.com/fuels-news-prices-analysis/fuels-analysis/articles/6-insights-fueling-disruptor"><span style="font-weight: 400;">insights on their business</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">Laura Behrens Wu and Simon Kreuz of </span><a href="https://goshippo.com"><b>Shippo</b></a> <span style="font-weight: 400;">were</span> <span style="font-weight: 400;">named to </span><a href="https://www.inc.com/profile/shippo"><span style="font-weight: 400;">Inc’s 30 under 30</span></a><span style="font-weight: 400;">. You can also check out a great interview with Laura </span><a href="http://www.huffingtonpost.com/entry/going-against-the-flow-laura-behrens-wu-ceo-of-shippo_us_5946e420e4b0d188d027ffa7?ncid=engmodushpmg00000004"><span style="font-weight: 400;">on The Huffington Post</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">Jack Newton of <strong><a href="https://www.clio.com">Clio</a></strong> was named one of </span><a href="http://vancouversun.com/business/local-business/timber-company-boss-named-most-likable-ceo-in-vancouver"><span style="font-weight: 400;">Vancouver’s most likeable CEOs</span></a><span style="font-weight: 400;"> (and we agree!). Once again, Clio was recognized as </span><a href="https://twitter.com/goclio/status/878093041478717440"><span style="font-weight: 400;">Team of the Year by BC Tech</span></a><span style="font-weight: 400;">. And there’s even more reason to attend the </span><a href="http://cliocloudconference.com/"><span style="font-weight: 400;">Clio Cloud Conference</span></a><span style="font-weight: 400;"> in New Orleans this fall, as they announced it will be headlined by Chris Hadfield, former commander of the International Space Station.</span> <span style="font-weight: 400;"><a href="http://www.asktrim.com"><strong>Trim</strong></a>, the personal savings bot, </span><a href="https://venturebeat.com/2017/06/01/personal-finance-bot-trim-launches-savings-for-visa-cash-back-rewards/"><span style="font-weight: 400;">announced </span><span style="font-weight: 400;">Savings</span></a><span style="font-weight: 400;">, a cash-back on purchases program for Visa cardholders.</span> <span style="font-weight: 400;"><a href="https://www.manifold.co"><strong>Manifold</strong></a> officially </span><a href="https://www.producthunt.com/posts/manifold"><span style="font-weight: 400;">launched to the public</span></a><span style="font-weight: 400;"> – it’s the place to find, buy, and manage cloud services.</span> <span style="font-weight: 400;">Last but not least, </span><a href="https://mattermark.com"><b>Mattermark</b></a><span style="font-weight: 400;"> announced that they are part of the </span><a href="https://mattermark.com/new-add-the-power-of-mattermark-lead-enrichment-in-salesforce"><span style="font-weight: 400;">Salesforce AppExchange</span></a><span style="font-weight: 400;"> and launched their free iPhone app, and free company/people search.</span> <span style="font-weight: 400;">We’re already moving full-steam into Q3. </span><span style="font-weight: 400;">To make sure you don’t miss any of the action, <a href="https://twitter.com/VersionOneVC"><strong>follow us on Twitter</strong></a></span><span style="font-weight: 400;">. Happy summer, everyone!</span>

<a href="https://www.blueapron.com/">Blue Apron</a> went public today. It was not the easiest road for them as they had to cut the originally proposed price range of $15-17 to $10 and closed the first day just around that at $10.01. As one can imagine, the media commentary was not pretty, calling the IPO a <a href="https://techcrunch.com/2017/06/29/blue-apron-whiffs-on-first-day-of-trading/">disappointment</a>, the stock <a href="http://investorplace.com/ipo-playbook/blue-apron-holdings-inc-aprn-goes-stale-right-out-of-the-box/">stale out of the box</a>, and lamenting that <a href="https://qz.com/1018253/blue-apron-priced-its-ipo-at-10-and-the-stock-closed-its-first-day-at-10/">the stock forgot to pop</a>. What I missed in most of this commentary was the fact that Matt Salzberg and his team had created a company with over $800m in revenues and a $2b valuation in a short 5 (!) years. This is an incredible entrepreneurial achievement that very, very few founders ever get to. <a href="http://www.zulily.com">Zulily</a> suffered from a similar negative narrative: when it got <a href="https://www.nytimes.com/2015/08/18/business/dealbook/liberty-interactive-agreed-to-buy-zulily-for-2-4-billion.html?_r=0">sold to QVC for $2.4b,</a> some people called the exit disappointing given that the company was once valued at over $7b in the public markets. You don't have to love the product, you don't have to like the business model, and you definitely don't have to buy the stock - but I hope that you appreciate the incredible entrepreneurial achievement in your analysis of a company that just went public and perhaps mention it in a phrase or two.

It has been no secret that we have been actively researching and pursuing blockchain companies, particularly those in the Ethereum ecosystem. A few months ago, <a href="https://www.versionone.vc/cryptocurrencys-second-act-rise-ethereum-whats-store-2017/">I wrote that 2017 could finally be the year</a> when cryptocurrencies start delivering on the huge potential that many have been predicting for a long time. Bitcoin, and the underlying blockchain technology, never developed a strong use case besides storing value. But with Ethereum, we’re seeing something new. Ethereum has elevated Bitcoin’s idea into a distributed world computer. We’re seeing new use cases, such as decentralized storage, decentralized prediction markets, and the ability to monetize software/open source. And, the true implications and potential of this platform are still largely unknown. If there’s any question about the potential of Ethereum, take a look at Fred Wilson’s interesting post, “<a href="http://avc.com/2017/03/the-decentralized-startups/">The Decentralized Startups</a>” where he charts Ethereum’s rapid growth from zero to a $3.4B market cap in under two years. This is why we are thrilled to announce our latest investment, <a href="http://citizenhex.com">Citizen Hex</a>. The company is centered around acquiring, securing, and trading ERC-20 tokens – and will help accelerate the ecosystem by increasing liquidity. Among Citizen Hex’s solutions are a proprietary tool for token acquisition and decentralized trading – think high frequency trading on the blockchain. They are also building the world’s most secure, cold, warm, and hot wallet solutions for token storage, as well as new tools to provide token liquidity on decentralized exchanges. The team behind Citizen Hex – led by <a href="https://www.linkedin.com/in/benjaminroberts100/">Ben Roberts</a> and <a href="https://www.linkedin.com/in/brettbergmann/">Brett Bergmann</a> – came out of the <a href="https://www.versionone.vc/creative-destruction-lab-west-helping-create-next-generation-entrepreneurs/">Creative Destruction Lab</a> (CDL). The two have been building crypto-projects on the side for a long time now and we’re so excited to officially welcome them to the Version One family. P.S.: Citizen Hex is <a href="https://angel.co/citizenhex/jobs">hiring</a>!

It has been no secret that we have been actively researching and pursuing blockchain companies, particularly those in the Ethereum ecosystem. A few months ago, I wrote that 2017 could finally be the year when cryptocurrencies start delivering on the huge potential that many have been predicting for a long time.